Petition for Writ of Certiorari — Three Movies of Tarzana v. Pacific Theatres, Inc.

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87 1089 ET DED

NEC 28 Wer

SEPH F. SPANIOL, JR.

No.

In the Supreme Court ofthe “=

United States

October Term, 1987

THEEE MOVIES OF TARZANA,

Petitioner,

PACIFIC THEATRES, INC., COLUMBIA PICTURES

INDUSTRIES, INC., PARAMOUNT PICTURES

CORPORATION, TWENTIETH CENTURY-FOX FILM

CORPORATION, UNIVERSAL FILM EXCHANGES,

INC., WARNER BROTHERS DISTRIBUTING

CORPORATION and MGM/UA ENTERTAINMENT

C@.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BLECHER & COLLINS, P.C.

MAXWELL M. BLECHER

CHRISTOPHER LAYNE

611 West Sixth Street

28th Floor

Los Angeles, California 90017

Telephone: (213) 622-4222

Attorneys for Petitioner

THEEE MOVIES OF TARZANA

Westside Law Publishers Los Angeles, California (213) 477-0491

QUESTIONS PRESENTED FOR REVIEW

What is the appropriate standard for granting

summary judgment in a rule of reason antitrust action?

Specifically, this petition involves a case where a genuine

issue was raised as to the reasonableness of a clearance

requested by a first-run motion picture exhibitor over

a primarily subrun theater. By requesting the clearance,

which was granted, the first-run exhibitor thereby

induced motion picture distributors to boycott the

subrun theater. Evidence was presented below that

respondents’ actions restricted output and reduced price

competition. The precise issue this petition raises is

whether the balancing of the clearance’s procompetitive

and anticompetitive effects required by the rule of reason

should have been undertaken by the trial court or left

to the jury.

LIST OF PARTIES

Petitioner Theee Movies of Tarzana (“TMT”) was

a partnership doing business under the fictitious name

“Theee Movies of Tarzana.” TMT was, until the sale

of its assets in late 1982, engaged in the exhibition of

motion pictures at a six-screen theater in Tarzana,

California.

Petitioner Pacific Theatres, Inc. (“Pacific”) is a

California corporation engaged in the business of

exhibiting motion pictures. Pacific operates a large chain

of theaters in Southern California, including since about

December 1980, a four-screen theater called the Pacific

Galleria (“the Galleria”). The Galleria is located in the

Sherman Oaks Galleria shopping center in Sherman

Oaks, California.

Respondents Columbia Pictures Industries, Inc.,

Paramount Pictures Corporation, Twentieth Century-

Fox Film Corporation, Universal Film Exchanges, Inc.,

Warner Brothers Distributing Corporation, and MGM/

UA Entertainment Co. (collectively, “the distributors”)

are engaged in the production, distribution and licensing

of films throughout the United States, including the San

Fernando Valley area of metropolitan Los Angeles. Each

of the distributors maintains a sales office or exchange

in the Los Angeles area for the purpose of licensing

its films to exhibitors.

ill

TABLE OF CONTENTS

Page

Questions Presented For Review........................05. i

en fics ccadncagacannsdccecossnass i

i i isto andcnagdssednccaeesuasevenees iV

Opinions Below........ FRE gata ch Gak shsbesseuaseleekiseises |

nos ceak ta dsduvetabachooasaness 2

Constitutional And Statutory Provisions Involved.... 2

ois scakesaccsssscocdiiesscnses: 2

A. Jurisdiction and Timeliness of Appeal ............. 2

sc desscseccnstecesercscesccosenes 2

Tei een ncccgcnssniecesdecaceseahs 2

2. wee Proceedings Below .......................... 6

Reasons For Granting The Writ........................ .. 8

Ne rid. sehen deewhndvenanccanisnss 8

- B. By Themselves Performing the Rule of Reason

Balancing Test, the Courts Below Improperly

Displaced the Jury from Its Rightful

EER Bt A ay Oe 11

C. Factual Issues Were Raised Concerning the

Clearance’s Anticompetitive Impact............... 14

a. The Clearance Adversely Affected Both Con-

sumer Choice And Price Competition.......... 18

b. The Clearance Was Unreasonably Restric-

tive As Evidenced by the Galleria’s Policy

of Playing Day and Date with MVW ....... 19

erie veces ctecscsesaiscsusssaveeses 20

Nir aee salle (deve tuk cbeisdassvadecceeaka Al

geri er uk ke sdevcsanctcesscchedssevesacsace Bl

TABLE OF AUTHORITIES CITED

Cases Page

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106S.

SRN Tg ti RF tn RDC 8 ND a

Arizona v. Maricopa County Medical Society, 457

Ue Mais, WUE Os GR, PI I onaccccccccccassecs 16

Barnes v. Arden Mayfair, Inc., 759 F.2d 676 (9th

Cor, GREED ccccecan. SEER a a BRR RC Be hic nes BA 10

Barry v. Blue Cross of California, 805 F. 2d 866

Gee es IE Gud sack cccsbeccaknecianeueete-carecuese. 10

Beltz Travel Service, Inc. v. International Air

Transport Association, 620 F.2d 1360 (9th Cir.

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d

263 (2d Cir. 1979), cert. denied, 444 U.S. 1093

SUED scdaccseaacckesdceonscdous ates aie 17, 20

Betaseed, Inc. v. U & I, Inc., 681 F.2d 1203 (9th

Ae PEED kckasccccudscccancssumcoessceeeeieei 15, 17, 20

Braxton-Secret v. A.H. Robins Co., 769 F.2d 528

Ss I bk a icncendstudanndcntetdacstisiemasess. 14

Broadcast Music, Inc. v. Columbia Broadcasting

System, Inc., 441 U.S. 1, 99 S.Ct. 1551

CP aks xesvincadececcieapids ieataeniecaneedsan: 21

Brunswick Corp. v. Vineberg, 370 F.2d 605 (Sth

Sel, SEE otic dnanseavecceu taba deutsaesatce cence oats. 10

Cascade Cabinet Co. v. Western Cabinet &

Millwork, Inc., 710 F.2d 1366 (9th Cir. 1983)

PEE SI ee toe Ee A EN a ere ONE Aba 13, 16

Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct.

Re cuss aia: 8, 9, 21

Continental T.V. , Inc. v. GTE Sylvania, Inc., 433

if & © 7 Be Ci, ees 16

F.T.C. v. Indiana Federation of Dentists, 476 U.S.

ST, Gere le Gs I CIO oven vicdneccecocacsecsecs 21

Fanchon & Marco v. Paramount Pictures, Inc., 100

F. Supp. 84 (S.D. Cal. 1951), cert. denied, 345

iii cnckncindidstinanentheddbe aise cass. 13

Fruehauf Corp. v. Royal Exchange Assurance of

America, Inc., 704 F.2d 1168 (9th Cir. 1983) ..... 14

Gaines v. Haughton, 645 F.2d 761 (9th Cir. 1981),

cert. denied, 454 U.S. 1145 (1982).................. 14

International Union of Bricklayers & Allied

Craftsman Local Union No. 20 v. Martin

Jaska, Inc., 752 F.2d 1401 (9th Cir. 1985)........ 14

Javelin Corp. v. Uniroyal, Inc., 546 F.2d 276 (9th

Cir. 1976), cert. denied, 431 U.S. 938 (1977)..... 15

Kaplan v. Burroughs Corp., 611 F.2d 286 (9th Cir.

1979), cert. denied, 447 U.S. 924 (1980) .......... 16

Los Angeles Memorial Coliseum Commission v.

National Football League, 726 F.2d 1381 (9th

Cir.), cert. denied sub nom. National Football

League v. Oakland Raiders, Ltd., 469 U.S. 990

II, 5 icci:stesacciarparaaiie pe pan onion umaah aileetianaa eas 17, 20

Matsushita Electric Industrial Co. v. Zenith Radio

Corp., 475 U.S. 574, 106 S. Ct. 1348 (1986)

ste dccbagibedie aeieddendh thdenaise akiaieonaa 8, 9, 21

Monsanto Co. v. Spray-Rite Service Corp., 465 U.S.

Fag, i: Gh, Bika anv cencccgctspepeeniosss. 8

National Basketball Association v. SDC Basketball

Club, Inc., 815 F.2d 562 (9th Cir.), cert.

dismissed sub nom. Los Angeles Memorial

Coliseum v. National Basketball Association,

56 U.S.L.W. 3401 (U.S. Nov. 23, 1987) (No.

IN sitios cab derdaddn bins doakenddatedion ties 10

National Society of Professional Engineers v.

United States, 435 U.S. 679, 98 S. Ct. 1355

loin I Lede phea dd auc aan iound 16

Naumkeag Theatres Co. v. New England Theatres,

Inc., 345 F.2d 910 (ist Cir.), cert. denied, 382

II 5,5: cca icssccees a need 13

Orbo Theatre Corp. v. Loew’s, Inc., 156 F. Supp.

770 (D.D.C. 1957), aff'd, 261 F.2d 380 (D.C.

Cir. 1958), cert. denied, 359 U.S. 943 (1959)..... 20

Poller v. Columbia Broadcasting System, Inc., 368

U.S. 464, 82 S. Ct. 486 (1962).................. 10, 11

Popham, Haik, Schnobrich, Kaufman & Doty, Ltd.

v. Newcomb Securities Co., 751 F.2d 1262

SII “WEEE « 4 ss vs so <ncasicoanaceroesencenatenabases 14

Quad Cinema Corp. v. Twentieth Century-Fox Film

Corp., 1983-1 Trade Cas. (CCH) 4 65,381

NY TIED oc ck keuececsnndedenadacactmasbeanades 17

R.C. Dick Geothermal Corp. v. Thermogenics, Inc.,

827 F.2d 407 (9th Cir. 1987)...... 10, 11, 17, 18, 21

Retail Clerks Union Local 648 v. Hub Pharmacy,

Inc., 707 F.2d 1030 (9th Cir. 1983)................. 14

Richards v. Nielsen Freight Lines, 602 F. Supp.

1224 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th

NEE, .vscaencsecudsedhvcvbentbaetdelbarsuatiaiadaske 14

Ron Tonkin Gran Turismo, Inc. v. Fiat

Distributors, Inc., 637 F.2d 1376 (9th Cir.),

cert. denied, 454 U.S. 831 (1981).......... 10, 11, 21

Solinger v. A&M Records, Inc., 586 F.2d 1304 (9th

Cir. 1978), cert. denied sub nom. Motown

Record Corp. v. Solinger, 441 U.S. 908 (1979)

Syufy Enterprises v. American Multicinema, Inc.,

793 F.2d 990 (9th Cir. 1986), cert. denied,

cf ee Renee 17

United States v. Paramount Pictures, Inc., 100

F. Supp. 84 (S.D. Cal. 1951), affd, 215 F.2d

167 (9th Cir. 1954), cert. denied, 348 U.S. 912

De Nan are toto caganccavessedeanedcnies 12-13

United States v. Paramount Pictures, Inc., 334 U.S.

Re ee Os Gs PU AI oon ceca accccnscctace vane 15, 18

Vii

Statutes

15 United States Code

i ircs ecard cbekedews col scasesewsensesscaspeacesbbos 2, 6,8

De ccnuludecbbdiedscsocesssesdiescchbeadutsnadssdbakousen 2, 6

28 United States Code

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Ph iccntstisasssbsieniinmcschund om A Ae

By MEE Susacoveosancnsccnsiesses< ning at ne, Tne ee

Rules

Federal Rules of Appellate Procedure

RR a ET Oree | 2

Federal Rules of Civil Procedure

a a | .. 2,8, 9, 10, 21

No.

In the Supreme Court of the

United States

October Term, 1987

THEEE MOVIES OF TARZANA,

Petitioner,

Vv.

PACIFIC THEATRES, INC., COLUMBIA PICTURES

INDUSTRIES, INC., PARAMOUNT PICTURES

CORPORATION, TWENTIETH CENTURY-FOX FILM

CORPORATION, UNIVERSAL FILM EXCHANGES,

INC., WARNER BROTHERS DISTRIBUTING

CORPORATION and MGM/UA ENTERTAINMENT

CO.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

OPINIONS BELOW

The opinion of the Court of Appeals for the Ninth

Circuit is reported at 828 F.2d 1395 (9th Cir. 1987) and

appears as Appendix A, pp. Al-A12. The opinion of

the District Court granting summary judgment against

TMT published at 1986-2 Trade Cas. (CCH) 4 67,231,

at 61,170 (C.D. Cal. 1986) and appears as Appendix

B, pp. BI-B10.

JURISDICTIONAL STATEMENT

The judgment of the Court of Appeals for the Ninth

Circuit was entered on September 28, 1987. TMT did

not file a petition for rehearing. Jurisdiction of this Court

is founded upon 28 U.S.C. § 1254(i).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Sherman Act, 15 U.S.C. § 1 provides:

Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint

of trade or commerce among the several States,

or with foreign nations, is declared to be illegal

STATEMENT OF THE CASE

A. Jurisdiction and Timeliness of Appeal.

TMT appealed from a decision of the United States

District Court for the Central District of California

granting summary judgment for respondents pursuant

to Rule 56, Fed. R. Civ. P. The trial court had subject

matter jurisdiction over the proceedings below pursuant

to 15 U.S.C. § IS.

The Court of Appeals for the Ninth Circuit had

jurisdiction of the appeal from the district court’s

decision pursuant to 28 U.S.C. § 1291. On July 28, 1986,

TMT timely filed its notice of appeal pursuant to 28

U.S.C. § 2107 and Rule 4(c), Fed. R. App. P. The Ninth

Circuit affirmed the district court.

B. Statement of Facts.

1. Background.

This petition concerns the licensing and exhibiting of

motion pictures. Motion picture theaters (“exhibitors”)

ome ar a

vce ana

compete with each other for the patronage of moviegoers

and for the right to license from film distributors motion

pictures for exhibition. Distributors license films for

exhibition (“runs”) on a geographic basis. A “run” is

the continuous exhibition of a motion picture in a defined

geographic area for a specific period of time. Within

a defined geographic distribution zone, films may be

licensed exclusively to one theater (“an exclusive run”)

or to two or more theaters (a “non-exclusive run” or

“multiple run”). When a film is licensed to run

simultaneously at two or more theaters in a defined

geographic zone, it is said to be playing “day and date”

at those theaters.

When seeking the right to exhibit a film, exhibitors

frequently request from the distributor a “clearance” over

competing theaters for a specific period of time. A

clearance obligates the distributor not to license the film

to cleared theaters. A clearance therefore prevents a

cleared theater from competing against the licensed

exhibitor by playing the film day and date.

Prior to selling its assets to Mann Theaters in late

1982, TMT operated a six-screen theater on Ventura

Boulevard in Tarzana, California. Although TMT

exhibited a limited number of films on a first-run basis,

invariably these were marginal first-run films with low

box office (“grossing”) potential. (CR 89:191-92.)

Essentially TMT was considered in the industry to be

a “subrun house.” (CR 89:162, 191-92; CR 90:464, 471.)

A subrun theater exhibits films after they have completed

their first-run at another theater (a “moveover” occurs

when a film completes its first-run and goes to a subrun

theater). TMT’ssubrun admission prices were lower than.

those charged by the first-run Galleria theater and by

West Valley first-run theaters. (CR 98, Exhibit C.) TMT

was a profitable business through 1981; however, in 1982,

its box office gross declined precipitously. (CR 98,

ExhibitA.) In 1982 Mann acquired TMT and renamed

the theater Mann’s Valley West (“MVW”). The record

below reflects that Mann spent some $658,000 remod-

eling the theater.

For the purposes of licensing motion pictures for

exhibition, film distributors historically had divided the

San Fernando Valley into distinct and separate East

and West Valley zones; the San Diego Freeway was

the dividing line. (CR 89:135; CR 98:11, 20, 22, 38-39,

42.) As a general rule, theaters were considered to be

in substantial competition only with theaters in their

own part of the valley; thus West Valley theaters were

not considered to be in substantial competition with East

Valley theaters (and vice versa). (CR 98:11, 20, 42-43.)

The East Valley/ West Valley zoning continued in effect

until Pacific’s Sherman Oaks Galleria theater opened

in late 1980. (CR 89:43-44.) The Galleria theater is

located just east of the San Diego Freeway; TMT was

located in Tarzana, approximately four miles west of

_the San Diego Freeway. When the Galleria opened,

Pacific began requesting clearance over TMT on all films

played by the Galleria. Pacific’s clearance request was

granted by the distributors, none of which questioned

or resisted its scope or duration. (CR 98:21, 23-24, 50-

51.)

The majority of subrun films exhibited by TMT had

their first-run at one of the three Woodland Hills

theaters: the Warner Center (United Artists), the

Woodland Hills (General Cinema Corporation), and the

Topanga Twin (Pacific). (CR 93:1-2.) However, TMT’s

access to subrun film product changed dramatically for

the worse when the Galleria opened its doors. (CR 89:45-

47; CR 98:9-10.) The Galleria often played first-runs

day and date with the Woodland Hills theaters. (CR

89:45-47.) The Galleria extended its first-run playtimes

beyond those of the Woodland Hills first-run theaters

and cleared TMT. This prevented TMT from subrun

exhibition of films that had completed their Woodland

Hills first-run but which continued to play “first-run”

at the Galleria. (CR 89:45-47; CR 93:2; CR 98:18.) By

this practice, Pacific prevented TMT from licensing as

“subruns” films that terminated their Woodland Hills

first-run as it had done before the Galleria’s opening.

As a direct result of the Galleria’s extended first-run

and clearance, TMT was precluded from licensing

films—including many large grossing films—which it

would have exhibited as subrun “but for” the Galleria’s

blanket clearance over it. (CR 98:1-2.)

In 1981 TMT’s film buyer initiated a meeting with

Pacific’s representatives to discuss the adverse impact

of the Galleria’s clearance on TMT and to request that

Pacific lift or modify the clearance. (CR 93:2; CR 98:9-

10.) Pacific rebuffed TMT’s entreaties. (CR 93:2-3.) As

a result of the Galleria’s clearance, TMT began to

experience serious financial difficulties. (CR 93:3.) As

its financial picture darkened, TMT made a second

attempt to persuade Pacific to lift the Galleria clearance.

In June 1982, TMT’s attorney wrote Pacific describing

the anticompetitive impact of the Galleria’s clearance

and asking that it be lifted or modified. (CR 93:2-3.)

Once again, Pacific refused to lift the Galleria’s clearance

over TMT. (CR 93:3.)

Ultimately, as a result of Pacific’s refusal to modify

or withdraw the Galleria clearance, TMT was unable

to secure subrun film product with sufficient grossing

potential to fill all of TMT’s six screens on a weekly

basis. (/d.) It became apparent to TMT’s managing

partner that TMT was headed for insolvency and that

the only viable option was to sell. (/d.) TMT’s assets

were sold at a distress price to Mann in October 1982.

After renovation (see above at p. 4) Mann reopened the

theater in December 1982.

Since mid-1984, the Galleria and MVW have played

day and date on a regular basis. During this period,

both theaters have enjoyed a steady increase in box office

revenues. In 1983 the Galleria’s gross box office receipts

were $1,892,982 and these increased in 1984 to

$1,964,459. MVW’s 1983 gross box office receipts were

$1,849,535 and these increased in 1984 to $2,368,510.

(CR 98, Exhibit A.) MVW is now considered a separate

run; thus there are now three Valley runs playing day

and date. (CR 98:58-60.) With the exception of MVW

(and theaters which are no longer in business) the

Galleria’s clearance patterns have remained essentially

unchanged both before and after Mann’s acquisition of

TMT. (CR 98:33.)

2. The Proceedings Below.

On July 2, 1984, TMT commenced this action below

to recover damages pursuant to Section 4 of the Clayton

Act, 15 U.S.C. § 15, for respondents’ violations of

Section | of the Sherman Act, 15 U.S.C. § 1. (CR 1.)

In its complaint petitioner alleged, inter alia, that by

granting the Galleria’s clearance over TMT, respondents

unreasonably refused to permit TMT to exhibit motion

pictures simultaneously with the Pacific Sherman Oaks

Galleria theater. TMT further alleged that this

unreasonable use of clearances was designed to restrain

trade and commerce in the distribution and licensing

of motion pictures by discriminating against independent

theaters like TMT (which often charge lower admission

prices than first-run theaters owned by the major

theater circuits). As a result of respondents’ course of

conduct: consumer choice and price competition in the

exhibition of films were adversely affected; TMT suffered

competitive injury to its business and property (lost box

office revenues); and the resulting economic distress

forced TMT to sell its assets to Mann at a price well

below their true value.

On April 14, 1986, Pacific moved for summary

judgment. (CR 86.) Pacific’s motion reduced the lawsuit

to a single issue: Were TMT and the Galleria substan-

tially competitive with one another? If so, the Galleria’s

clearance over TMT was perforce reasonable as a matter

of law. (CR 85:1.) Pacific’s motion hinged on the almost

purely factual argument that because of demographical

factors TMT and the Galleria were in substantial

competition:

The two theatres were less than 5 miles apart

on the same, easily traveled major thorough-

fare—Ventura Doulevard. The theatres were

about 13 minutes away from each other for

potential patrons driving at the posted speed

limit—even less if the Ventura Freeway was

used. No rivers, mountains, industrial parks,

airports, railroad yards or other barriers stood

in the way of someone wanting to see a film

at the Galleria or plaintiff's theatre. The San

Diego Freeway is not the Berlin Wall. There

is absolutely no evidence in the record to

support a finding the two theatres did not draw

patronage from the same geographical area.

(CR 85:2.)

Pacific’s summary judgment motion was heard by the

trial court on May 19, 1986, and on July 28, 1986, the

district court entered judgment in Pacific’s favor. (CR

121.) The trial court explained its decision in a

memorandum granting respondents’ motions for

summary judgment. (CR 120.) The trial court concluded

that TMT and the Galleria were in substantial

competition and that the Galleria’s clearances were

reasonable. (CR 120:11.)

REASONS FOR GRANTING THE WRIT

A. Introduction.

In recent years this Court has had occasion to consider

and more sharply delineate the criteria for granting

summary judgment pursuant to Rule 56, Fed. R. Civ. P.

In Matsushita Electric Industrial Co. v. Zenith Radio

Corp., 475 U.S. 574, 106 S. Ct. 1348 (1986), the Court

addressed the standard for summary judgment in

antitrust conspiracy cases where the factual context

suggests plaintiff’s claim is implausible. The Court held

that “[t]o survive a motion for summary judgment...

a plaintiff seeking damages for a violation of § | must

present evidence ‘that tends to exclude the possibility’

that the alleged conspirators acted independently.”

Id. at 588, 106 S. Ct. at 1357 (quoting Monsanto Co. v.

Spray-Rite Service Corp., 465 U.S. 752, 764, 104 S.Ct.

1464, 1471 (1984)).

In Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct.

2548 (1986), the Court held that on a motion for

summary judgment, Rule 56 requires the nonmoving

party to go beyond the pleadings and adduce specific

facts that demonstrate the existence of a genuine issue

for trial. Id. at 2553. The Court also stressed that

“[s]ummary judgment procedure is properly regarded

not as a disfavored procedural shortcut, but rather as

an integral part of the Federal Rules as a whole, which

are designed ‘to secure the just, speedy and inex-

pensive determination of every action.’” Jd. at 2555

(citations omitted).

In Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

106 S. Ct. 2505 (1986), the Court stated that the inquiry

performed on a motion for summary judgment is the

threshold analysis of “determining whether there is the

need for a trial—whether, in other words, there are any

genuine factual issues that properly can be resolved only

by a finder of fact because they may reasonably be

resolved in favor of either party.” Jd. at 2511. The

Court went on to say that summary judgment is

not proper “[i]f reasonable minds could differ as to

the import of the evidence” and stressed that “at the

summary judgment stage the judge’s function is not

himself to weigh the evidence and determine the truth

of the matter but to determine whether there is a

genuine issue for trial.” Jd.

Read together, Matsushita, Celotex, and Anderson

underscore the tension between the conflicting policy

objectives that underlie Rule 56. On the one hand,

Matsushita and Celotex, which emphasize the nonmov-

ing party’s burdens, reflect sound considerations of

judicial administration and economy: summary judg-

ment is a tool “to isolate and dispose of factually

unsupported claims or defenses.” Celotex, 106 S. Ct.

at 2553. On the other hand, as Anderson suggests, in

considering summary judgment motions, courts must

be careful not to usurp the jury’s function and thereby

abridge the nonmoving party’s right to a jury trial. As

the court stated in Brunswick Corp. v. Vineberg, 370

F.2d 605, 612 (Sth Cir. 1967), “[s}ummary judgment is

a lethal weapon, and courts must be mindful of its aims

and targets and beware of overkill in its use.”

The difficulty of reconciling these competing policy +

imperatives can be especially acute in rule of reason

antitrust cases. The balancing inquiry mandated by the

rule of reason is factually intensive. Moreover, several

Ninth Circuit decisions have stated that for this reason,

courts are “particularly reluctant” to grant summary

judgment in rule of reason cases. R.C. Dick Geothermal

Corp. v. Thermogenics, Inc., 827 F.2d 407, 422 (9th

Cir. 1987); Ron Tonkin Gran Turismo, Inc. v. Fiat

Distributors, Inc., 637 F.2d 1376, 1388 (9th Cir.), cert.

denied, 454 U.S. 831 (1981). R.C. Dick and Ron Tonkin-

echo the holding in Poller v. Columbia Broadcasting

System, Inc., 368 U.S. 464, 473, 82 S. Ct. 486, 491 (1962),

that summary judgment is to be granted sparingly in

antitrust cases. After an apparent eclipse, Poller has once

again found favor with the Ninth Circuit. See National

Basketball Association v. SDC Basketball Club, Inc.,

815 F.2d 562, 567 (9th Cir.), cert. dismissed sub nom.

Los Angeles Memorial Coliseum v. National Basketball

Association, 56 U.S.L.W. 3401 (U.S. Nov. 23, 1987) (No.

87-376). Yet, there is no clear consensus within the Ninth

Circuit about Poller or its specific extension to rule of

reason cases. See, e.g., Barry v. Blue Cross of California,

805 F.2d 866, 871 (9th Cir. 1986), where the Ninth

Circuit, quoting Barnes v. Arden Mayfair, Inc., 759 F.2d

676, 680 (9th Cir. 1985), stated that Poller’s language

“merely teaches caution” and affirmed the grant of

summary judgment in a rule of reason case.

The confusion that surrounds the application of Rule

56 in antitrust cases is illustrated in the instant petition.

In a rule of reason case where genuine issues of material

fact were in dispute, summary judgment was nonetheless

granted against TMT. Both the district court below and

the Ninth Cireuit ignored the cautionary injunctions of

Poller, R.C. Dick and Ron Tonkin: rather than deferring

to the jury, the courts below themselves proceeded to

undertake the balancing test mandated by the rule of

reason. The decisions below reflect the state of confusion

in this area of the law. Petitioner TMT respectfully

submits that by granting this petition for a writ of

certiorari, this Court could refine the guidelines for

summary judgment in rule of reason antitrust cases and

alleviate the confusion on this score that now besets

the lower courts.

B. By Themselves Performing the Rule of Reason

Balancing Test, the Courts Below Improperly

Displaced the Jury from Its Rightful Function.

Although the district court purported to conclude that

there were no genuine issues of material fact, it is

apparent from reading the court’s memorandum opinion

that, in reality, genuine issues of material fact were in

dispute. The district court, however, granted summary

judgment for respondents because the court itself

weighed the disputed facts and contradictory inferences

and concluded that the Galleria’s clearance over TMT

was not an unreasonable restraint on competition.

The district court found the following facts: (1) The

Galleria and TMT were both located on Ventura

Boulevard in the San Fernando Valley; (2) The Galleria

and TMT were located approximately four and one half

miles apart; (3) The Galleria and TMT were easily

accessible to the West San Fernando Valley moviegoing

public; (4) TMT was basically a subrun theater; (5)

TMT’s subrun admission prices were lower than the

Galleria’s admission prices for first-run films; (6) In terms

of its amenities, TMT was not a first-run theater; (7)

In terms of amenities, the Galleria was a state of the

art first-run theater; (8) TMT and the Galleria

occasionally bid against each other for the right to exhibit

first-run films; and (9) The Galleria exercised a clearance

over TMT. (Appendix B at B2-B3.)

On that basis and without any serious discussion of

the procompetitive and anticompetitive effects of the

Galleria’s clearance over TMT, the district court

concluded:

The evidence reveals that the TMT and Galleria

theatres were located near enough to one

another to draw patrons from the same

surrounding communities; no barriers pre-

vented patrons from travelling to one or to

the other; both were located on the same major

thoroughfare, Ventura Boulevard; both com-

peted with one another and other theatres for

the rights to screen first run films although

TMT’s bids reflect that it was less intent on

showing first run films as [sic] were the other

first run theatres; occasionally, TMT did screen

first run films and charged admission prices

equivalent to those charged by the Galleria.

As defendants have shown, the issue of

reasonableness and, hence, the legality of the

clearances, is premised upon a showing that

the theatres were in substantial competition.

United States v. Paramount Pictures, Inc., 100

F. Supp. 84 (S.D. Cal. 1951), aff'd, 215 F.2d

167 (9th Cir. 1954), cert. denied, 348 U.S. 912

(1955).' Substantial competition is a legal

conclusion to be drawn from the evidence.

Naumkeag Theatres Co., v. New England

Theatres, Inc., 345 F.2d 910 (Ist Cir.), cert.

denied, 382 U.S. 906 (1965).

TMT has presented no evidence controvert-

ing that of the defendants to show that the

theatres were not in substantial competition.

The Court concludes that TMT and the

Galleria were in substantial competition and

that the Galleria’s clearances were reasonable.

(/d. at B6-B7.)

The Ninth Circuit affirmed the district court's decision.

Unlike the district court, which engaged sub rosa in a

rule of reason balancing test, the Ninth Circuit, citing

Casc ide Cabinet Co. v. Western Cabinet & Millwork,

Inc., 710 F.2d 1366, 1373 (9th Cir. 1983), explicitly

acknowledged that in a rule of reason case “[d]etermining

whether a particular restraint is reasonable requires a

‘thorough investigation of the industry at issue and a

balancing of the arrangement’s positive and negative

effects on competition.’"(Appendix A at A8.) The Ninth

Circuit found that the positive effects on competition

of the Galleria’s clearance over TMT outweighed the

negative effects because: (1) The Galleria’s clearance

promoted interbrand competition by forcing TMT to

find alternative subrun movies to exhibit and promote;

(2) the clearance protected the Galleria by ensuring that

its box office revenues would not be diminished by

competition from TMT, and (3) the clearance protected

'The district court's citation is incorrect. The case the district

court intended to cite is Fanchon & Marco v. Paramount Pictures,

Inc., 100 F. Supp. 84 (S.D. Cal. 1951), cert. denied, 345 U.S. 964

(1953).

the distributors’ interest in maximizing their income from

licensing exhibition rights to their films. (/d. at A9-A10.)

C. Factual Issues Were Raised Concerning the

Clearance’s Anticompetitive Impact.

As the Ninth Circuit has said:

Summary judgment is proper when there is

no genuine issue of material fact, and the

moving party is entitled to judgment as a matter

of law. The facts must be viewed and inferences

must be drawn in the manner most favorable

to the non-moving party.

Retail Clerks Union Local 648 v. Hub Pharmacy, Inc.,

707 F.2d 1030, 1033 (9th Cir. 1983); Fruehauf Corp.

v. Royal Exchange Assurance of America, Inc., 704 F.2d

1168, 1171 (9th Cir. 1983); Gaines v. Haughton, 645

F.2d 761, 769 (9th Cir. 1981), cert. denied, 454 U.S.

1145 (1982).

Summary judgment is not to be granted where

contradictory inferences may be drawn from the facts,

even if the facts themselves are undisputed. Braxton-

Secret v. A.H. Robins Co., 769 F.2d 528, 531 (9th Cir.

1985); cf. International Union of Bricklayers & Allied

Craftsman Local Union No. 20 v. Martin Jaska, Inc.,

752 F.2d 1401, 1405 (9th Cir. 1985). Similarly, “[i}f there

is significant probative evidence in the record in support

of both parties’ contentions, summary judgment will not

be proper for either.” Richards v. Nielsen Freight Lines,

602 F. Supp. 1224, 1231 (E.D. Cal. 1985), aff'd, 810

F.2d 898 (9th Cir. 1987). As the court observed in

Popham, Haik, Schnobrich, Kaufman & Doty, Ltd. v.

Newcomb Securities Co., 751 F.2d 1262, 1266 (D.C.

Cir. 1985):

Summary judgment is not to be granted-

merely because the moving party appears likely,

or even very likely, to prevail at trial; the

procedure is reserved for cases where the

material facts are so clear that a trial would

be an empty exercise in formalism.

(Emphasis added.)

As the Ninth Circuit has repeatedly stressed, in

antitrust cases the general standards for summary

judgment “are applied even more stringently and

summary judgments granted more sparingly.” Beltz

Travel Service, Inc. v. International Air Transport

Association, 620 F.2d 1360, 1364 (9th Cir. 1980);

Betaseed, Inc. v. U & I, Inc., 681 F.2d 1203, 1207-

08 (9th Cir. 1982); Javelin Corp. v. Uniroyal, Inc., 546

F.2d 276, 280 (9th Cir. 1976), cert. denied, 431 U.S.

938 (1977). This policy has developed because antitrust

cases “usually involve extensive factual determinations.”

Solinger v. A&M Records, Inc., 586 F.2d 1304, 1309

(9th Cir. 1978), cert. denied sub nom. Motown Record

Corp. v. Solinger, 441 U.S: 908 (1979).

These general strictures are particularly applicable to

the instant case. The antitrust legality of a clearance

depends solely on its reasonableness under a rule of

reason analysis. United States v. Paramount Pictures,

Inc., 334 U.S. 131, 144-48, 68 S. Ct. 915, 923-25 (1948).

Over the years the meaning of the term “clearance” has

changed substantially. At the time of the Supreme

Court’s seminal decision in Paramount Pictures,

“clearance” referred to the interval between a film’s “first-

run” and its subsequent run. Today, however, clearances

give first-run theaters the exclusive right to exhibit a

film in a particular area or zone in order to protect

the theater’s box office revenues from the loss that might

be incurred if the film were exhibited simultaneously

by other first-run theaters with which it is in direct and

substantial competition. Unlike this usual situation,

however, in the instant case TMT was a subrun theater

and the Galleria was a first-run theater. Thus the issue

raised below—the reasonableness of a first-run theater’s

clearance over a subrun theater with which it does not

directly compete—is quite different from that typically

presented in antitrust cases involving clearances.

As the Supreme Court stated in National Society of

Professional Engineers v. United States, 435 U.S. 679,

691, 98 S. Ct. 1355, 1365 (1978), “the inquiry mandated

by the rule of reason is whether the challenged agreement

is one that promotes competition or one that suppresses

competition.” The Ninth Circuit has stated that rule of

reason analysis requires a detailed investigation of the

involved industry’s structure and a balancing of the

challenged restraint’s pro- and anticompetitive effects.

Cascade Cabinet, 710 F.2d at 1373. “[T]he primary

considerations in determining whether a restraint of

trade is unreasonable are whether the intent of the

restraint is anticompetitive and whether the restraint

itself has significant anticompetitive effects.” Kaplan v.

Burroughs Corp., 611 F.2d 286, 291 (9th Cir. 1979),

cert. denied, 447 U.S. 924 (1980).

Rule of reason analysis is an intensely factual inquiry:

it “requires the factfinder to decide whether under all

the circumstances of the case the restrictive practice

imposes an unreasonable restraint on competition.”

Arizona v. Maricopa County Medical Society, 457 U.S.

332, 343, 102 S. Ct. 2466, 2472 (1982) (emphasis added);

Continental T. V., Inc. v. GTE Sylvania, Inc., 433 U.S.

36, 49, 97 S. Ct., 2549, 2557 (1977); Cascade Cabinet,

710 F.2d at 1370. Finally, in determining a restraint’s

legality the availability of alternatives that would have

a less restrictive impact on competition is a factor that

must be considered. Los Angeles Memorial Coliseum

Commission v. National Football League, 726 F.2d 1381,

1396 (9th Cir.), cert. denied sub nom. National Football

League v. Oakland Raiders, Ltd., 469 U.S. 990 (1984);

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d

263, 303 (2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980).

As with any other restraint on competition subject

to the rule of reason, a clearance’s reasonableness “is

a paradigm fact question.” Betaseed, 681 F.2d at 1228

29 (citations omitted). Indeed the Ninth Circuit has

strongly suggested that the reasonableness of a particular

clearance can be determined only by a jury. Syufy

Enterprises v. American Multicinema, Inc., 793 F.2d

990, 996-97 (9th Cir. 1986), cert. denied, — U.S. -—,

107 S. Ct. 876 (1987). See also Quad Cinema Corp. v.

Twentieth Century-Fox Film Corp., 1983-1 Trade Cas.

(CCH) 4 65, 381, at 70,267, 70,272 (S.D.N.Y. 1983).

As the Ninth Circuit has stated in R.C. Dick, 827 F.2d

at 419, a flexible approach must be taken in determining

whether a conspiracy has had a substantial effect on

competition.

In the instant case summary judgment was particularly

inappropriate. The Galleria’s decision to lift its clearance

over Mann’s Valley West gives rise to more than

an inference—it indeed is probative evidence—that its

clearance over TMT was an unreasonable restraint of

trade that had a significant anticompetitive effect. A

jury could have found that the day and date exhibitions

at the MVW and the Galleria established that the clear-

ance agreement between Pacific and the defendant.

distributors vis-a-vis the less competitive TMT was

unreasonable because it restricted competition and

eliminated consumer choice.

a. The Clearance Adversely Affected Both

Consumer Choice and Price Competition.

As the Supreme Court stated in Paramount Pictures,

334 U.S. at 145, 68 S. Ct. at 923, the character of the

theaters involved is a key factor to be considered in

determining a clearance’s reasonableness. While it was

in existence, TMT offered filmgoers a choice. Those

eager to view a newly released film in more luxurious

surroundings could pay a higher price and see the film

at the Galleria. But, on the other hand, TMT offered

the same film at a lower price to moviegoers willing

to defer seeing the film until it moved-over to TMT

after completing its Woodland Hills first-run.

Consumer choice is, as the Ninth Circuit has said,

the hallmark of competition. R.C. Dick, 827 F.2d at

421. The Galleria’s clearance over TMT eliminated

consumer choice because moviegoers were prevented

from seeing a film at TMT after it had concluded its

Woodland Hills first-run; they could then only see the

film at the Galleria.

In weighing the anticompetitive effect of the Galleria’s

clearance, both the district court and the Ninth Circuit

failed to consider fully the geography and demographics

of the San Fernando Valley. Below, respondents

admitted that the Galleria drew patrons from throughout

the valley. (CR 85:8.) If so, then while exhibiting the

same films day and date, the Galleria and the Woodland

Hills theaters were in “substantial competition” for

patrons. The Galleria, however, did mot clear the

Woodland Hills theaters. The question therefore arises:

If the Galleria could compete on a first-run day and

date basis with the Woodland Hills theaters, what

procompetitive factors justified its refusal to play day

and date with TMT’s subrun ( ie., TMT’s exhibition of

films that had completed their Woodland Hills first-

run)? Neither the district court aor the Ninth Circuit

considered this question. This is an issue that properly

ought to have been addressed by a jury which might

have concluded on the basis of the facts in evidence

that the anticompetitive effects of the Galleria’s clearance

outweighed any possible procompetitive purposes.

b. The Clearance Was Unreasonably Restrictive

As Evidenced by the Galleria’s Policy of

Piaying Day and Date with MVW.

The balancing inquiry conducted by the trial court

and the Ninth Circuit was defective in other respects

because it gave short shrift to additional facts that

would have supported a jury verdict in TMT’s favor.

When Mann took over TMT it spent some $658,000

to thoroughly refurbish and modernize the theater. As

a result, the old TMT was reborn as MVW—a

multiscreen, state-of-the-art cinema fully competitive

with the Galleria as a first-run theater. Despite this

competition from MVW, the Galleria lifted its clearance

and competed with MVW on a day and date basis. Even

competing head-to-head, both the Galleria and MVW

operated profitably. Notwithstanding this fact, the trial

court and Ninth Circuit held that the Galleria’s clearance

over TMT was competitively justified. In other words,

the courts below accepted the Galleria’s contention that

it was harmed economically by competing against the

subrun TMT, notwithstanding its ability to compete

successfully day and date against the first-run MVW.

Again, the shortcomings of the decisions below are

underscored. A reasonable jury, viewing the same facts,

might well have concluded that, in view of its ability

to compete successfully against MVW, the anticompet-

itive effects of the Galleria’s clearance outweighed any

procompetitive purposes advanced thereby. From the

facts in evidence, a reasonable jury could have inferred

that the Galleria’s clearance over TMT was excessive.

See Orbo Theatre Corp. v. Loew’s, Inc., 156 F.Supp.

770, 778 (D.D.C. 1957), aff'd, 261 F.2d 380 (D.C. Cir.

1958), cert. denied, 359 U.S. 943 (1959).

Finally, it is clear that in rule of reason cases it is

necessary to consider whether the procompetitive

objective can be achieved by a means that has a less

restrictive impact on competition than the restraint

actually used. Los Angeles Memorial Coliseum

Commission, 726 F.2d at 1396; Betaseed, 681 F.2d at

1228; Berkey Photo, 603 F.2d at 303. Here, there was

an obviously less restrictive alternative to the Galleria’s

blanket clearance over TMT: a discriminating, selective

use of clearances for specific films in situations where

the particular circumstances would justify the clearance.

However, neither the district court nor the Ninth Circuit

considered the availability of a less restrictive alternative.

CONCLUSION

The standards that govern the granting of summary

judgment in antitrust cases are unclear and inconsistently

applied.Courts should be especially reluctant to grant

summary judgment in rule of reason antitrust cases. The

balancing of a challenged restraint’s procompetitive and

anticompetitive effects is a factual inquiry within a jury’s

particular sphere of competence.

The decisions below suggest why this Court should

consider providing additional guidance to the lower

federal courts on the standard for granting summary

judgment in antitrust cases. In theory, the decisions

below reflect the courts’ determinations that there was

not a single fact in the record that could possibly support

a jury finding that the Galleria’s clearance over TMT

was unreasonable as to its scope or duration. The record

does not sustain such a determination. On the contrary,

a number of material facts in the record, and the

reasonable inferences drawn therefrom, would have

supported a jury verdict in TMT’s favor. It is clear,

then, that the decisions below were not based on the

proper application of Rule 56. Rather, they reflect not

an absence of genuine issues of material fact but instead

the decisions of the courts below to take out of the

jury’s hands—and place into their own—the fact-based

balancing inquiry mandated by the rule of reason. Given

the important public policy goals encompassed in the

Sherman Act and the Seventh Amendment, this Court

cannot have intended that Matsushita and Celotex be

interpreted by the lower federal courts in such a way

as to curtail jury trials in rule of reason antitrust cases.

Simply put, juries, not judges, are assigned the task of

undertaking the rule of reason’s balancing test—a point

ignored by the courts below.

Today, there is a vital need for this Court to reaffirm

this principle. There is a clear trend toward narrowing

the category of restraints deemed per se violative of the

antitrust laws. Cf F.T.C. v. Indiana Federation of

Dentists, 476 U.S. 447, 106 S. Ct. 2009, 2017-18 (1986);

Broadcast Music, Inc. v. Columbia Broadcasting

System, Inc., 441 U.S. 1, 99 S. Ct. 1551 (1979); R.C.

Dick, 827 F.2d at 414-15; Ron Tonkin, 637 F.2d at 1381-

88. As the per se rule’s applicability is constricted, it is

obvious that an increasing number of economic restraints

will be subjected to rule of reason analysis. The

inexorable logic of an enhanced role for rule of reason

analysis is a greater reluctance to dispose of antitrust

cases On summary judgment. Greater reliance on fact-

based rule of reason analysis necessarily elevates the

importance of juries as fact-finders in antitrust cases.

In policy terms there is a clear trade-off: narrowing the

scope of the per se rule in favor of extending the rule

of reason means that federal courts must act more

cautiously than ever before in granting summary

judgment in antitrust cases.

For all the foregoing reasons, petitioner TMT

respectfully requests that the instant petition be granted.

Dated: December 28, 1987

Respectfully submitted,

BLECHER & COLLINS, P.C.

MAXWELL M. BLECHER

CHRISTOPHER LAYNE

611 West Sixth Street

28th Floor

Los Angeles, California 90017

Telephone: (213) 622-4222

By:

MAXWELL M. BLECHER

APPENDIX

THEEE M OVIES OF TARZANA v. PACIFIC THEATRES , INC.

Cite as 828 F.2d 1395 (9th Cir. 1987)

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TuHeee Movies oF TARZANA,

Plaintiff-Appellant,

PACIFIC THEATRES, INC., COLUMBIA No. 86-6211

PicTURES INDUSTRIES, INC.,

PARAMOUNT Pictures Corp., ‘ D.C. No.

TWENTIETH CENTURY FOX FILM 84-4890

Corp., UNIVERSAL FILM OPINION

EXCHANGES, INC., WARNER

BROTHERS DISTRIBUTING CorpP.,

MGM/UA ENTERTAINMENT Co.,

Defendants-Appellees.

Argued and Submitted

August 6, 1987—Pasadena, California

Filed September 28, 1987

Before: Cynthia Holcomb Hall and Edward Leavy, Circuit

Judges, and Robert P. Aguilar,* District Judge.

Opinion by Judge Leavy

Appeal from the United States District Court

for the Central District of California

David W. Williams, District Judge, Presiding

*Honorable Robert P. Aguilar, United States District Judge, Northern

District of California, sitting by designation.

TuHeee Movies v. Pacific THEATRES

SUMMARY

Antitrust

Appeal from judgment. Affirmed.

Appellant Theee Movies of Tarzana (TMT) operated a

“subrun™ movie theater in Tarzana. TMT was not a first run

quality theater. Most of the subrun movies shown by TMT

had their first run in Woodland Hills. Only a few first run the-

aters existed in the San Fernando Valley. Appellee Pacific

opened the first run quality Galleria Theater, located near

TMT's theater. Soon after it opened, Pacific began requesting

clearances over TMT for all first run movies shown at the

Galleria. Due to the Galleria’s clearances, a time period

existed between the end of a first run at a Woodland Hills the-

ater and its end at the Galleria when TMT was prevented

from showing the particular film. TMT contends that because

of the Galleria’s extended clearances, its ability to obtain sub-

run movies was crippled and led to its deteriorating financial

situation. Allegedly it cause TMT to sell to Mann Theaters

(Mann). Mann remodeled the theater to first run quality. The

Galleria stopped requesting clearances over Mann's remod-

eled theater. TMT claims this is evidence that the Galleria’s

clearances were unreasonable. However. Pacific contends

that it reluctantly withdrew its clearance requests, and only

on a movie-by-movie basis, under pressure from the distribu-

tors who wanted more opportunities for exhibiting first

runs. The district court granted summary judgment in favor

of Pacific.

[1] The parties do not dispute that the first factor of a cause

of action for an unreasonable restraint of trade is met. The

parties disagree on whether factors two and three are met. [2]

The second factor concerns whether a particular restraint is

reasonable. [3] Vertical restraints are reasonable if they are

likely to promote interbrand competition without overly

THeee Movies v. Paciric THEATRES 3

restricting intrabrand competition. The clearances encourage

interbrand competition and the reduction in intrabrand com-

petition was minor. [4] The third factor requiring proof is

whether the restraint in question injures competition in the

relevant market; injury to the plaintiff alone is not sufficient

to prove injury to competition. The alleged injury must be

caused by a reduction in competition resulting from the

restraint. [5] Competition in the Valley has actually been

enhanced by the entry of Mann’s theater. [6] The injury to

TMT was not due to disruption in competition caused by the

Galleria’s clearances; it was due to TMT'’s inability or unwill-

ingness to compete. [7] TMT argues that the clearances

resemble a horizontal restraint of trade, relying on case law.

The relied-upon law is not applicable.

COUNSEL

Maxwell M. Blecher, Los Angeles, California, for the

plaintiff-appellant.

Harry B. Swerdlow, Beverly Hills, California, for the

defendant-appellee Pacific Theatres, Inc.; Bertrand M. Coo-

per and Gregory P. Goeckner, Los Angeles, California, for the

defendants-appellees Columbia Pictures Industries, Inc., Par-

amount Pictures Corporation, Twentieth Century Fox, Uni-

versal Film Exchange and MGM/UA Entertainment;

Richard C. Yarmuth, Seattle, Washington, for the defendant-

appellee Warner Brothers Distributing Corp.

OPINION

LEAVY, Circuit Judge:

The appellant, Theee Movies of Tarzana (TMT), is a part-

nership which owned a six screen movie theater in Tarzana,

4 ~ THeee Movies v. Pacific THEATRES

California. The appellees are a competing movie exhibitor.

Pacific Theatres, Inc. (Pacific), and several movie distributors

(the distributors). TMT alleges the appellees violated § | of

the Sherman Act. 15 U.S.C. § 1 (1987). At issue is the reason-

ableness of certain “clearances” granted to Pacific by the dis-

tributors in movie exhibition licenses.

Movie exhibitors submit bids to movie distributors for the

right, or license, to exhibit particular movies. These bids usu-

ally include certain proposed terms: the guaranteed mini-

mum the theater will pay the distributor regardless of the

movie’s success, division of profits between the exhibitor and

distributor, the time period the movie will show, and any

clearances. Clearances preclude distributors from licensing

other theaters, either specifically named or encompassed in a

named geographic area, from showing a movie while it is

being exhibited by the theater whose bid is accepted. Distrib-

utors evaluate these terms, and other factors, in determining

which theaters they will license to show particular movies.

TMT claims that the distributors and Pacific acted in con-

cert to provide Pacific’s Galleria Theater with clearances over

TMT'’s theater, giving the Galleria an unreasonable competi-

tive advantage. TMT alleges the appellees’ conduct elimi-

nated price competition in the relevant market and

eventually drove TMT out of business.

TMT sold its theater to Mann Theaters, after which Pacific

and the distributors abandoned the clearances. TMT con-

tends this demonstrates the clearances were unreasonable.

TMT seeks damages for alleged business losses.

The district court granted summary judgment and entered

a judgment of dismissal in favor of all the defendants. The

district court held that TMT’s theater and Pacific’s theater

were in substantial competition, that the clearances were rea-

sonable, and that TMT had failed to ‘produce evidence of

either a conspiracy or an antitrust injury.

THEEE MOVIES v. Pacific THEATRES 5

FACTS

TMT owned and operated a six screen “subrun” movie the-

ater on Ventura Boulevard in Tarzana, a community in Cali-

fornia’s San Fernando Valley, from 1972 until fall 1982. A

subrun theater exhibits movies subsequent to their first run in

a given area.

TMT acknowledges that the physical condition of its the-

ater had deteriorated over the years. The theater also lacked

the state of the art projection and sound systems that the first

run movie theaters used. TMT’s admission prices were about

fifty cents less than those charged by first run theaters.

Most of the subrun movies shown by TMT had their first

run at one of three theaters in Woodland Hills, a community,

like Tarzana, located in the western portion of the San Fer-

nando Valley. Until the late 1970's, only these few first run

theaters existed in the Valley. Then, motion picture distribu-

tion patterns began to change nationwide. Due to the emer-

gence of home video cassette recorders and cable television,

distributors released movies simultaneously to increasing

numbers of first run theaters, to enhance their chances of

recouping their investment during the shorter theater release

periods. Promotional costs escalated, similarly necessitating

wider first run releases. These nationwide trends were acceler-

ated in the Valley by the area’s growing population.

In December 1980, Pacific opened the Galleria Theater in

Sherman Oaks. The Galleria is also located on Ventura Boul-

evard, 4.4 miles east of TMT’s theater. The Galleria is

approximately a thirteen minute drive from TMT'’s theater.

The Galleria was new, clean, and comfortable; offered first

run movies; and had state of the art projection and sound sys-

tems.

Soon after the Galleria opened, Pacific began requesting

clearances over TMT for all first run movies shown at the

Aé

6 ; THEEE Movies v. Pacific THEATRES

Galleria. Since the Woodland Hills first run theaters also his-

torically requested and received clearances over TMT on first

run movies, Pacific’s request would normally not have had

any additional effect on TMT’s ability to obtain subrun mov-

ies. However, the Galleria exhibited its first run movies for a

longer time period than did the Woodland Hills first run the-

aters. Thus, due to the Galleria’s clearances, a time period

existed between the end of a first run at a Woodland Hills the-

ater and its end at the Galleria when TMT was prevented

from showing the particular film. However, these movies

were available to other subrun theaters in Woodland Hills

over which the Galleria apparently did not have clearances.

According to various evidence, Galleria first runs lasted

from one to five weeks longer than the Woodland Hills first

runs. The parties dispute how many films were affected, with

allegations ranging from two to thirteen films over an eigh-

teen month period.

TMT contends that because of the Galleria’s extended

clearances, its ability to obtain subrun movies was “crippled”

and its financial situation, previously healthy, began to dete-

riorate. This allegedly caused TMT to sell its assets to Mann

Theaters (Mann) at the “distress” price of $1.4 million in

October 1982.

Mann spent $658,000 remodeling and upgrading the the-

ater to first run quality and renamed it Mann’s Valley West

(MVW). It installed new projection and sourd equipment,

and began aggressively bidding for first run movies. It took

approximately nine months for movie distributors to license

regularly Mann to exhibit first runs. MVW charges first run

movie prices.

In June 1984, the Galleria stopped requesting clearances

over MVW. TMT claims this is evidence that the Galleria’s

clearances over TMT were unreasonable. However, Pacific

contends that it reluctantly withdrew its clearance requests,

THEEE Movies v. PaciFic THEATRES 7

and only on a movie-by-movie basis, under pressure from the

distributors who wanted more opportunities for exhibiting

first runs.

STANDARD OF REVIEW

This court reviews a district court's grant of summary judg-

ment de novo. 7.W. Elec. Serv., Inc. v. Pacific Elec. Contrac-

tors Ass'n, 809 F.2d 626, 629 (9th Cir. 1987).

Summary judgment is disfavored in complex antitrust liti-

gation if extensive factual determinations must be made con-

cerning intent and motive. Betaseed, Inc. v. U & I Inc., 681

F.2d 1203, 1207 (9th Cir. 1982). However, it is appropriate

in “the absence of any significant probative evidence tending

to support the complaint.” First Nat'l Bank of Ariz. v. Cities

Serv. Co., 391 U.S. 253, 290 (1968); Barry v. Blue Cross of

Cal., 805 F.2d 866, 871 (9th Cir. 1986). Then it can be

applied “in the twinkling of an eye.” Barry, 805 F.2d at 871

(quoting NCAA v. Board of Regents, 468 U.S. 85, 109-10 n.39

(1984)).

DISCUSSION

Clearances are vertical non-price restraints of trade. United

States v. Paramount Pictures, Inc., 334 U.S. 131, 144-46

(1948); Ralph C. Wilson Indus. Inc. v. Chronicle Broadcasting

Co., 794 F.2d 1359, 1363 (9th Cir. 1986). Vertical non-price

restraints of trade are evaluated under the rule of reason.

Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36,

58-59 (1977). The district court properly analyzed the clear-

ances under the rule of reason.

{1] To establish a cause of action for an unreasonable

restraint of trade under the rule of reason, the plaintiff must

show: “(1) An agreement among two or more persons or dis-

tinct business entities; (2) which is intended to harm or unrea-

sonably restrain competition; and (3) which actually causes

8 ___THEEE Movies v. PaciFic THEATRES

injury to competition.” Reid Bros. Logging Co. v. Ketchikan

Pulp Co., 699 F.2d 1292, 1296 (9th Cir. 1983). The parties do

not dispute that the first factor is met; the clearances are

agreements between Pacific and each distributor. However,

the parties do disagree on whether factors two and three are

met.

A. Reasonableness of Restraint

[2] Determining whether a particular restraint is reasonable

requires a “ ‘thorough investigation of the industry at issue

and a balancing of the arrangement’s positive and negative

effects on competition’.” Cascade Cabinet Co. v. Western

Cabinet & Millwork, Inc., 710 F.2d 1366, 1373 (9th Cir. 1983)

(quoting Northrop Corp. v. McDonnell Douglas Corp., 705

F.2d 1030, 1050 (9th Cir.), cert. denied, 464 U.S. 849 (1983)).

As acknowledged by courts over the years, “the whole system

of runs and clearances ... purposely, and legitimately, dis-

criminates between competing exhibitors.” Naumkeag The-

atres Co., Inc. v. New England Theatres, Inc., 345 F.2d 910,

912 (1st Cir.), cert. denied, 382 U.S. 906 (1965); see also Para-

mount Pictures, 334 U.S. at 145-46.

[3] Verticai restraints are reasonable if they are likely to

promote interbrand competition without overly restricting

intrabrand competition. Continental T.V., Inc. v. G.T.E. Syl-

vania Inc., 694 F.2d 1132, 1136-37 (9th Cir. 1982). The Gal-

leria’s clearances reduced intrabrand competition by

preventing TMT from showing first run movies simulta-

neously with the Galleria. However, they also encouraged

interbrand competition by forcing TMT to find alternative

subrun movies to exhibit and to promote. Moreover, the

reduction in intrabrand competition was minor. First run

movies still playing at the Galleria were shown as subruns at

other Valley theaters over which the Galleria did not have

clearances. The distributors did not refuse to deal with TMT;

they simply offered the Galleria first run movies a few weeks

later than TMT desired. Movies not playing at the Galleria

THEEE Movies v. PAaciFic THEATRES 4

were not affected: TMT could exhibit them as always. The

clearances were a sound business practice for Pacific and the

distributors.

Courts have found clearances in particular to be reasonable

restraints of trade under certain conditions: when the theaters

are in substantial competition, and the clearances are used to

assure the exhibitor that the distributor will not license a

competitor to show the movie at the same time or so soon

thereafter that the exhibitor’s expected income will be greatly

diminished. Paramount Pictures, 334 U.S. at 145-46.

The district court properly found that TMT’s theater and

the Galleria were in substantial competition. The theaters

were located on the same major thoroughfare only a short dis-

tance apart, no barriers prevented patrons from driving

between the theaters, TMT occasionally bid on first runs,

TMT acknowledged it was substantially competitive with

Woodland Hills theaters located farther away than the Gal-

leria, TMT’s former owner and film buyer admitted several

times that they considered the two theaters to be in substan-

tial competition, the Galleria is located in a regional shopping

center which draws patrons from throughout the Valley, and

both advertised throughout the Valley.

Because the two theaters were in substantial competition,

Pacific was properly concerned that exhibiting first runs at

TMT’s theater simultaneously with the Galleria would

diminish the Galleria’s income. Pacific wanted to recoup its

investment in the Galleria and advertising, rather than allow

TMT’s theater to “free ride” on its advertising.

The distributors had a legitimate business interest in the

revenue generated by the theaters they licensed, because the

distributors were paid, in part, out of each movie’s gross prof-

its. [d.; Southway Theatres. Inc. v. Georgia Theatre Co., 672

F.2d 485, 488 (Sth Cir. 1982). The distributors wished to

reach the largest number of viewers with the smallest number

Al0

10 THEEE Movies v. Pacific THEATRES

of movie prints. to recoup quickly their own investment.

TMT did not offer distributors as much in guaranteed pay-

ments and profits as did the first run theaters. The distribu-

tors made a sound business judgment that the Galleria would

generate more profits for them, and sooner, than would

TMT’s theater.

We agree with the district court that the clearances were

reasonable. The TMT theater and the Galleria were in sub-

stantial competition with one another. The clearances pro-

moted interbrand competition without overly restricting

intrabrand competition.

B. Injury to Competition

[4] An antitrust plaintiff must prove that the restraint in

question injures competition in the relevant market; injury to

the plaintiff alone is not sufficient to prove injury to competi-

tion. Robert's Waikiki U-Drive, Inc. v. Budget Rent-A-Car

Sys., Inc., 732 F.2d 1403, 1408 (9th Cir. 1984). “The anti-

trust laws, however, were enacted for ‘the protection of

competition, not competitors’.” Brunswick Corp. v. Pueblo

Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (quoting Brown

Shoe Co., Inc. v. United States, 370 U.S. 294, 320 (1962)).

Finally, the alleged injury must be caused by a reduction,

rather than an increase, in competition resulting from the

restraint. California Computer Prod., Inc. v. IBM Corp., 613

F.2d 727, 732 (9th Cir. 1979).

[5] As the district court found, competition in the Valley

has actually been enhanced by the entry of Mann’s theater.

Now an additional theater shows first run movies, thereby

increasing competition among first run theaters. That the

Galleria dropped its clearance requests over the MVW the-

ater at the distributors’ insistence demonstrates this

increased competition, contrary to TMT’s assertion that it

demonstrates the clearances were unreasonable.

All

_ THeee Movies v. PaciFic THEATRES Ll

[6] The injury ta TMT. loss of its business. was not due to

disruption in competition caused by the Galleria’s clearances:

rather. it was due to TMT'’s inability or unwillingness to com-

pete. TMT acknowledged its movie bids were lower than the

Galleria’s. TMT did not make the changes in its theater facil-

itv Or equipment necessary to compete in the market. Mann

recognized the potential in the TMT theater, acquired it, and

made the investment necessary to turn it into a competitive

movie theater.

We agree with the district court’s conclusion that TMT

failed to demonstrate injury to competition by the Galleria’s

clearances over TMT’s theater.

C. Clearances as a Horizontal Restraint of Trade

[7] In its reply brief, TMT for the first time argues that the

clearances resemble a horizontal restraint of trade, relying

primarily on Zidell Explorations, Inc. v. Conval Int'l, Lid.,

719 F.2d 1465 (9th Cir. 1983). Horizontal restraints of trade

are generally presumed to be illegal. Cascade Cabinet, 710

F.2d at 1370.

TMT contends that “[bJecause the restraint was initiated

by a horizontal competitor of the plaintiff in order to curtail

rivalry at the exhibitor level, the restraint is horizontal in

nature, not vertical.” While TMT believes the rule of reason

standard is appropriate, it asserts that because the clearances

are allegedly horizontal restraints, “a presumption of illegal-

ity exists.”

Zidell is not applicable. The Zidell court held that “if a

manufacturer deliberately withdraws its product from a

price-cutting distributor at the request of a competing distrib-

utor as part of a conspiracy to protect the requesting distribu-

tor from price competition, the manufacturer has committed

a per se violation of the antitrust laws.” 719 F.2d at 1469.

Here. no evidence exists, nor does TMT allege, that the dis-

Al2

12 - THEEE Movies v. Pacific THEATRES

tributors withdrew from doing all business with TMT. Busi-

ness decisions were made on a movie-by-movie and

bid-by-bid basis. The distributors simply did not offer TMT

two to thirteen movies when TMT wanted them: no evidence

suggests TMT did not or could not obtain those movies even-

tually. :

While the effect of the clearances might have harmed the

business of a price discounting competitor, Pacific and the

distributors had legitimate business reasons for maintaining

the clearances and Pacific’s higher prices. No evidence sup-

ports TMT’s contention that concern about TMT'’s prices

motivated the clearances. The Galleria was a higher quality

theater than TMT’s, requiring more money to maintain, it

competed with other first run theaters, necessitating advertis-

ing costs, and it invested in state of the art equipment. The

distributors decided that for these reasons, the Galleria might

attract a larger patronage than TMT'’s theater, and therefore

increase their own revenues. The evidence supports the

appellees’ position that these were the reasons for the clear-

ances.

CONCLUSION

The clearances were reasonable restraints of trade and the

appellant has failed to show an antitrust injury. The district

court’s decision granting summary judgment in favor of the

appellees is affirmed.

AFFIRMED.

PRINTED FOR

ADMINISTRATIVE OFFICE—U.S. COURTS

BY BARCLAYS / ELECTROGRAPHIC—SAN FRANCISCO—{41 5) 588-1155

The summary. which does not constitute a part of the opinion of the court, is

THEEE MOVIES OF TARZANA v. PACIFIC THEATRES, INC.

Cite as 1986-2 Trade Cas. (CCH) 4 67,231

(C.D. Cal. 1986)

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

THEEE MOVIES OF TARZANA, )

Plaintiff, )

) No. CV 84-4890-

Vs. ) DWN

PACIFIC THEATRES, INC., )

COLUMBIA PICTURES INDUS- ) MEMORANDUM

TRIES, INC., PARAMOUNT ) GRANTING

PICTURES CORPORATION, ) DEFENDANTS’

TWENTIETH CENTURY FOX ) MOTIONS FOR

FILM CORPORATION, UNI- ) SUMMARY

VERSAL FILM EXCHANGES, ) JUDGMENT

INC., WARNER BROS. DISTRI- )

BUTING CORPORATION, AND )

MGM/UA ENTERTAINMENT )

CO., )

Defendants. )

This is an antitrust action brought by one former

motion picture theatre owner against an existing theatre

chain and several film distributors for conspiring to drive

the former from the industry.

APPENDIX B

FACTS

Plaintiff Theee Movies of Tarzana (hereinafter TMT)

is the former proprietor of a theatre consisting of six

auditoriums. The TMT threatre used standard projection

and sound equipment, not the state-of-the-art 70 mm

and Dolby Sound systems utilized by its competitors

and successor. The auditoriums were not maintained

in top condition as evidenced by the expenditures for

renovations by TMT’s successor, Mann Theatres.

The TMT theatre was located on Ventura Boulevard

on which numerous motion picture theatres were found.

- Defendant Pacific Theatres’ Pacific-4 Galleria theatre

(hereinafter Galleria) is located in the Sherman Oaks

Galleria Shopping Center also on Ventura Boulevard,

about four and one-half miles from the TMT theatre

site. Ventura Boulevard is a major thoroughfare

transversing the southern portion of the San Fernando

Valley. Both the TMT and Galleria theatres are easily

accessible to the movie-going public in the surrounding

community either by means of nearby freeways, major

boulevards or local streets.

Film licensing in relation to the instant action consists

of two types of screenings: first run and subsequent run

films. The first run is the initial screening of a film in

a viewing area. A subsequent run is just that; it is a

screening subsequent to the first run. First run theatres

such as the Galleria, often have top quality facilities,

state-of-the-art projection and sound equipment and

charge higher prices than do subsequent run theatres.

For the most part, the TMT theatre screened films

on their subsequent runs with an occasional less popular

first run film. When TMT screened a first run film,

however, it charged admission prices equivalent to those

of other first run theatres, raies higher than its normal

admission.

Film distributors regularly solicit bids from theatres

for the rights to screen films. The Galleria and TMT

often bid against one another for the rights to screen

certain motion pictures. The facts reveal, however, that

TMT’s bids for first run films rarely matched those of

most first run theatres. Often accompanying successful

bids were exclusivity arrangements, known as clearances,

which prevented certain competing theatres from

simultaneously showing the identical film. It is the

reasonableness and, hence, legality of such clearances

with which TMT takes issue in this lawsuit.

TMT'’s troubles developed because the clearances over

it from the first run theatres in the Woodland Hills area

often did not coincide with those of the Galleria to the

east. This prevented TMT from obtaining subsequent

run films immediately after their first runs in Woodland

Hills or Sherman Oaks as had been the practice prior

to the Galleria’s opening in 1980. TMT began to suffer

at the box office. In 1982 TMT elected to sell its theatre

to Mann Theatres for $1.4 million, an allegedly distressed

price.

Mann Theatres renovated the theatre, adding 70 mm

projection and Dolby Sound equipment, expending

approximately $650,000. It also risked $1 million in

bidding for first run films. The new theatre, Mann’s

Valley West Sixplex, was transformed into a successful

first run theatre, a risk TMT was never willing to take.

Distributors, seeking wider first run screenings with

the advent of cable television and home video cassette

recorders, convinced the Galleria to drop its clearance

over Mann’s Valley West Sixplex in 1984, allowing both

theatres to screen the identical films in head-to-head

competition for the first time. Thereafter TMT filed its

complaint alleging that the defendants had conspired

to drive it from the business by means of the Galleria’s

clearances.

THE CONTENTIONS OF PARTIES

Pacific Theatre seeks summary judgment on the

ground that the Galleria’s clearances over TMT were

reasonable because the theatres were in substantial

competition as evidenced by the facts and admissions

of TMT’s former owner and film buyer. Only after a

change in circumstances, the development of cable

television and video recorders, did the Galleria

reluctantly agree to withdraw its clearance to ailow for

the wider screening of first run films.

In addition, there was no injury to competition, a

prerequisite for an antitrust violation. Mann’s Valley

West Sixplex’s higher bids forced other theatres to

increase their bidding, thereby enhancing competition.

Furthermore, TMT has no evidence of any unlawful

schemes involving clearances employed by the

defendants.

The distributor defendants’ arguments follow those

of Pacific Theatres. They contend that there is no

evidence of disparate treatment of theatres falling within

the area cleared by the Galleria. Nor is there evidence

that any conspiracy existed. Rather, the distributors have

shown legitimate business reasons for their decisions.

TMT contends that the defendants conspired to

restrain or eliminate price competition when the

distributors acceded to Pacific Theatres’ demands to

place their films beyond the reach of TMT by means

of clearances. TMT, unable to obtain films because of

the Galleria’s clearances, was forced to sell its theatre.

Futhermore, the issue of substantial competition is one

of fact precluding summary judgment. It can be inferred

that the distributor defendants were motivated by the

prospect of higher film licensing revenues to drive TMT

from the scene and promote a higher revenue producing

theatre in its stead.

DISCUSSION

The standard for granting summary judgment requires

that there be no genuine issue of material fact and that

the moving party be entitled to judgment as a matter

of law. Poller v. Columbia Broadcasting System, Inc.,

368 U.S. 464 (1962). A party opposing summary

judgment is entitled only to reasonable inferences that

may be drawn from the evidence. Barnes v. Arden

Mayfair, Inc., 759_F.2d 676 (9th Cir.1985); Ron Tonkin

Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d

1376 (9th Cir. 1981). But when substantial evidence is

not produced by the nonmoving party and there is

overwhelming evidence favoring summary judgment, it

may be unreasonable to draw an inference contrary to

movant’s interpretation of the facts and, therefore,

summary judgment would be appropriate. /d.

The recent pronouncement by the Supreme Court in

Matsushiia Electric Industrial Co., Ltd. v. Zenith Radio

Corp., 475 U.S. —~, 89 L.Ed.2d 538 (1986), held that

to survive defendant’s motion for summary judgment

in an antitrust case, the plaintiff must establish a genuine

issue of material fact as to whether defendants entered

into an illegal conspiracy that caused plaintiff to suffer

a cognizable injury. This requires the production of two

aaa

elements: (1) Plaintiff must show more than aconspiracy;

it must show an injury resulting from illegal conduct.

(2) The factual issue must be genuine; when defendants

meet their burden under Fed. R. Civ. P. 56(c), plaintiff

must do more than simply show that there is some

metaphysical doubt as to the material facts; the

nonmoving party must come forward with specific facts

showing that there is a genuine issue for trial. 89 L.Ed.2d

at 551-52.

Under the rule of reason analysis, there must be a

determination whether under the circumstances the

restrictive practice, Galleria’s clearance, imposes an

unreasonable restraint on competition. Cascade Cabinet

Co. v. Western Cabinet & Millwork, Inc., 710 F.2d 1366

(9th Cir. 1983); Quad Cinema Corp. v. Twentieth

Century-Fox Film Corp., 1983-1 Trade Cas. (CCH)

para. 65,381 (S.D. N.Y. May 12, 1983).

To establish a cause of action for unreasonable

restraint of trade under the rule of reason analysis,

plaintiff must show an agreement intended to harm or

unreasonably restrain competition and actual injury to

competition resulting therefrom. Cascade Cabinet Co.

v. Western Cabinet & Millwork, Inc., supra. Factors

examined in determining reasonableness are listed in

United States v. Paramount Pictures, Inc., 334 U.S. 131

(1948). These include: admission prices; size, quality,

location and operation of the theatres; rental terms and

distributors’ revenues; relationship between theatres and

distributors; and extent of the theatres competition.

The evidence reveals that the TMT and Galleria

theatres were located near enough to one another to

draw patrons from the same surrounding communities,

no barriers prevented patrons from travelling to one

et Ie an ee,

or to the other; both were located on the same major

thoroughfare, Ventura Boulevard; both competed with

one another and other theatres for the rights to screen

first run films although TMT’s bids reflect that it was

less intent on showing first run films as were the other

first run theatres; occasionally, TMT did screen first

run films and charged admission prices equivalent to

those charged by the Galleria.

As defendants have shown, the issue of reasonableness

and, hence, the legality of the clearances, is premised

upon a showing that the theatres were in substantial

competition. United States v. Paramount Pictures, Inc.,

100 F. Supp. 84 (S.D. Cal. 1951), aff'd 215 F.2d 167

(9th Cir. 1954), cert. denied, 348 U.S. 912 (1955).

Substantial competition is a legal conclusion to be drawn

from the evidence. Naumkeag Theatres, Co., Inc. v. New

England Theatres, Inc., 345 F.2d 910 (lst Cir.), cert

denied, 382 U.S. 906 (1965).

TMT has presented no evidence controverting that

of the defendants to show that the theatres were not

in substantial competition. The Court concludes that

TMT and the Galleria were in substantial competition

and that the Galleria’s clearances were reasonable.

Under a per se analysis, the focus is upon whether

there was a concerted effort between a distributor and

theatre to engage in anticompetitive activity, namely,

a refusal by the distributor to deal with other theatres.

Zidell Explorations, Inc. v. Convai International, Ltd.,

719 F.2d 1465 (9th Cir. 1983); Ron Tonkin Gran-

Turismo, Inc. v. Fiat Distributors, Inc., supra.

Defendants have submitted declarations from their

employees which categorically deny the existence of any

conspiracy to prevent TMT from obtaining the films

it sought. TMT has presented no evidence controverting

this testimony. Rather, it relies upon a Fifth Circuit

case, Powers v. Nassau Development Corp., 753 F.2d

457 (Sth Cir. 1985), for the proposition that summary

judgment is not appropriate where a trier of fact could

draw an inference of anticompetitive intent. Along this

vein, TMT argues that the dealings between Pacific

Theatres and the distributor defendants which resulted

in the Galleria’s clearances might infer a refusal to do

business. The distributors continued to do business with

TMT, however.

TMT has not presented any evidence that the

defendants entered into a conspiracy. The distributor

defendants’ acts of licensing top films to theatres

submitting winning bids are legitimate business

decisions. It would be unreasonable to expect the

distributors to provide first run films to theatres

proffering bids worth less than others. The evidence

reveals that TMT did not bid sufficiently for first run

films. As the Court stated in Matsushita Electric

Industrial Co., Ltd. v. Zenith Radio Corp., supra at

553, citing Monsanto Co. v. Spray-Rite Service Co.,

456 U.S. 752, 764 (1984),“conduct as consistent with

permissible competition as with illegal conspiracy does

noi, standing alone, support an inference of antitrust

conspiracy.” TMT’s failure to provide any evidence of

a conspiracy other than defendants’ dealings which can

reasonably be interpreted as prudent business decisions,

does not infer an antitrust conspiracy. See also Barnes

v. Arden Mayfair, Inc., supra.

Additionally, there is no evidence to support a

conclusion that the defendants intended to discriminate

against TMT because of lower admission prices. First,

admission prices are but one factor which distributors

may examine when determining whether or not to issue

a clearance. United States v. Paramount Pictures, Inc.,

supra. Thus, the per se analysis is not applicable to this

situation. Second an examination of the theatres’

admission prices reveals that the price differential is

insignificant. TMT and the Galleria charged the same

admission for first run films. Only when TMT screened

subsequent run films was there any difference in price,

a 12.5% decrease from the $4.00 first run admission to

$3.50. TMT was in no way a “cut-rate” theatre.

Antitrust laws were enacted to protect competition.

Brunswick Corp. v. Pueblo Bowl-A- Mat, Inc., 429 U.S.

477 (1977); Aydin Corp. v. Loral Corp., 718 F.2d 879

(9th Cir. 1983). Actual injury to competition must be

shown. Brunswick Corp. v. Pueblo Bowl-A- Mat, Inc.,

supra; Cascade Cabinet Co. v. Western Cabinet &

Millwork, Inc., supra.

Although a single competitor, TMT, may have been

injured by the Galleria’s clearances, there is no evidence

that competition was harmed. In contrast, competition

has been enhanced by the entry into the market of Mann’s

Valley West Sixplex which has competitively bid for

first run films and, consequently, increased distributors’

revenues resulting in keener competition among theatres.

CONCLUSION

The Court concludes that TMT and the Galleria were

in substantial competition; that the Galleria’s clearances

were reasonable; and that TMT has failed to produce

evidence of a conspiracy in light of defendants’ plausible

explanation of their business dealings. Furthermore,

there has been no showing of a required antitrust injury.

Rather, TMT failed to take advantage of its circum-

B10

stances and take the risks which Mann Theatres was

willing to do and from which it now is reaping benefits.

The Court finds that there are no genuine issues of

material fact and that defendants are entitled to judgment

as a matter of law. Pacific Theatres’ and the distributor

defendants’ motions for summary judgment are hereby

GRANTED.

The Court adopts this Memorandum as its findings of

fact and conclusions of law.

IT IS SO ORDERED.

DATED: This 23 day of July, 1986.

Me ¢ (dull...

DAVID W. WILLIAMS

Senior U.S. District Judge

PROOF OF SERVICE BY MAIL

State of Calfornia

ss.

County of Los Angeles

I, the undersigned, say: I am and was at

all times herein mentioned, a citizen of the

United States and a resident of the County of

Los Angeles, over the age of eighteen (18)

years and not a party to the within action or

proceeding; that my business address is 11333

Iowa Avenue, Los Angeles, California 90025;

that on December 28, 1987, I served the within

Petition for A Writ of Certiorari in said

action or proceeding by depositing true copies

thereof, enclosed in a sealed envelope with

postage thereon fully prepaid, in the United

States mail at Los Angeles, California,

addressed as follows:

Clerk, United States

Supreme Court

One First Street, N.W.

Washington, D.C. 20543

(Original and forty copies)

Harry B. Swerdlow, Esq.

James L. Seal, Esq.

Joseph L. Golden, Esq.

ROSENFELD, MEYER &

SUSMAN

9601 Wilshire Boulevard

Suite 444

Beverly Hills, California

90210

Philip E. Westbrook, Esq.

Bertrand M. Cooper, Esq.

Gregory P. Goeckner, Esq.

O'MELVENY & MYERS

1800 Century Park East

Suite 600

Los Angeles, California 90067

Richard C. Yarmuth, Esq.

Michael D. Helgren, Esq.

CULP, DWYER, GUTERSON

& GRADER

2700 One Union Square

Seattle, Washington 98101

Robert J. Rose, Esq.

NUTTER, BIRD, MARELLA,

BOXER, WOLPERT & MATZ

10960 Wilshire Boulevard

24th Floor

Los Angeles, California 90024

I declare under penalty of perjury that the

above is true and correct.

Executed this 28th day of December, 1987,

at Los Angeles, California.

Siri Ved K. Khalsa

(Original signed)

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.